THE PRICE OF A PINT (PART 1)

Having successfully avoided the need for any panic (or precautionary) buying during the brief flurry of snow last week I had no need to rush out and try and buy sixteen pints of UHT milk and half a dozen loaves of bread and had no need to fight someone in the supermarket for the last broken bag of sprouts. That aside, but with milk on my mind I wondered why successive UK Governments have failed to take any meaningful action to help our dairy farmers (or any of our farmers for that matter).

I suspect that this is down to a combination of nice financial inducements from large Supermarkets and a more marked indifference to the agricultural sector. As consumers we also need to take a share of the blame because we allowed all of these things to happen. If we want quality milk and dairy products (actually produced from UK milk or even made in Wales) then we will have to change the way we buy, then our farmers will get a better deal and we will get a quality product.

One consequence of how we buy and how our milk is produced for us and sold to us is that the number of dairy farmers in Wales dropped by a third in five years (up to December 2009) and this despite repeated warnings that more needed to be done to save the industry. Our farmers have consistently not received a fair price for the milk they produce, which when compared to the price charged by retailers to consumers, which will sadly not come as much of a surprise to most people.

Before our farmers, dairy or otherwise, are driven out of business entirely then need action not words. If our governments at all levels do nothing then the future for agriculture may be grim, semi industrial and serviced by cheap migrant workers. Industrial milk production has been much trumpeted as the saviour of the dairy industry (and a number of important planning applications are in the pipeline) but it is not without its problems.

There are waste issues, slurry production being one of them, which can be enormously toxic and environmentally damaging. There are also likely to be animal welfare issues when it comes to industrial farming. Modern cows to produce large amounts of cheap milk, a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years but it only has three (milking years) in which to do this.

Historically the old answer to low milk prices or a surplus was to turn excess milk into other dairy products, like butter, cream, cheese and yoghurt's. The problem we in Wales face is that many local Welsh dairies serving our urban centres are no longer in business – some around Cardiff were bought up and sold off for housing and diary operations in some areas relocated outside of Wales. What this all means is that we in Wales miss out, as Dairy products are potentially big business as some of our more successful organic producers can prove.

The development of railway communications during the industrial revolution provided s means for rapid delivery of farmers milk to towns and cities and lead to a growth of diary production. The first of the supermarkets (Sainsbury’s in Covent Garden, London, in 1869) sold “railway milk” from churns.

The milkman delivered direct to our doorsteps, his near demise came later as a direct result of super market price-cutting which has now, more or less, effectively killed him off. The decimation of rural railways following a Conservative Government (questionably motivated) decision to favour road transport weakened the very infrastructure that had driven an expansion of the dairy industry.

A 29 (gate price) pence litre of milk may end up being sold for 15 times as much, people pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce healthy profits for the companies that produce them. We have some excellent and very successful companies and producers doing just that, but, this potentially profitable sector of the agricultural economy in Wales is undeveloped.

As for buying local - around 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was actually produced outside of the UK. Yogurt and cheese aside; its a pretty similar story when it comes to butter. Only one of the most popular supermarket brands [Country Life] is actually made from UK milk. The bulk of our butter comes from Denmark and Ireland, and this is despite the fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with eleven years ago now import almost half of our butter from abroad, cheese imports are also up, some 60 percent over the last eleven years. We are importing products that have added-value and are busy exporting the low-value milk products which are then ironically turned into butter, yogurt, etc and sold right back to us.

This is total madness; this is what happens in the developing or third world, not in the first world. In the developing world many countries have little choice but to export their raw commodities cheaply and then have little or no choice other than to buy back manufactured products made from their own raw materials.

EVERY LITTLE HELPS?

It has long been noted that when it comes to justice (and a fair price) for consumers the wheeels of justice can turn pretty slow and those with deep pockets can no doubt smooth the path towards compromise and delay. The Office of Fair Trading (OFT) after an inquiry into the price fixing of dairy products has hit Tresco with a £10m fine.

The supermarket giant was one of nine firms facing penalties totalling close to £50m for colluding over the price of milk and cheese in 2002 and 2003. The OFT found that Arla, Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, The Cheese Company, Wiseman, and Tesco all infringed the Competition Act by co-ordinating rises in the prices consumers paid for certain dairy products in 2002 and, or 2003.

Tesco who have denied collusion with the other companies, say they will appeal have expressed "surprise and dismay" that it was included in the penalties handed down by the regulator. OFT estimates that the collusion (or unhappy coincidence) resulted shoppers paying 2 pence extra for a litre of milk and 2p extra on 100g of cheese.


The final penalties announced by the OFT were £9.39m for Asda, £7.14m for Dairy Crest, £1.66m for McLelland, £5.69m for Safeway, £11.04m for Sainsbury's, £1.26m for The Cheese Company, £3.2m for Wiseman and £10.43m for Tesco. Although Arla was found to been involved in the infringement regarding milk in 2003, it has not been fined as it alerted the OFT to price fixing and was given immunity.

While this does not sound much the regulator initially calculated that £270m extra was spent by UK consumers as a result of the price fixing, but no total figure has been included in the final report. So how much longer will we have to wait for the Con Dem Govenrment to deliever on its pre election promises of brining in a Supermarket Ombudsman?

CRYING OVER SPILT MILK

Successive UK Governments (both Conservative and Labour) have failed to take any meaningful action to help our dairy farmers. Why? Well the cynic or the realist (in me) suspects that this is either down to a combination of nice financial inducements from large Supermarkets and / or a general indifference to the agricultural sector. We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal.

It's worth noting that the number of dairy farmers in Wales dropped by a third in five years (up to December 2009) and this despite repeated warnings that more needed to be done to save the industry along with the fact that our farmers are also not getting a fair price for the milk they produce, when compared to the price charged by retailers to consumers, will sadly not come as much of a surprise to most people.

There was even prior to the last Westminster General election some talk of a milk ombudsman, but it needs to be more than talk, there is a need for action, before our dairy farmers (and our farmers) are driven out of business entirely. What may follow if nothing is done may not be pretty, it may be semi industrial and serviced by cheap migrant Labour. Supermarkets as well as their bought tame politicos in the Westminster village (is that too harsh? No probably not) have to take a share of the blame for aggressively pursuing ever greater shares of the profit.

When considering the price of a pint of milk there are a few things we should all know. One litre carton of full-fat, non-organic milk can cost between 70-80p (January 2010 figures). From this a farmer will get between 21p and 28p. Production costs come in at around 28p. In the last 10 years two thirds of dairy farmers in England and Wales have gone out of business, and it has been estimated that one dairy farmer leaves the industry every day. While these may be old figures, the situation has not got any easier for the farmers or the consumers, they more than illustrate the problem facing our farmers, especially as we now have to factor in increased transport costs.

The shelf price for four pints has remained static at £1.25 for 4 pints since February 2011, and widespread promotions continue to be offered on liquid milk in May with Sainsburys and Asda offering 2 x 4 pints for £2.00 and Tesco offering 3 x 4 pints for £3.00. Supermarkets are also widely offering branded and organic milk on promotion in May.

DEFRA's annual data shows that the UK farm gate price has increased by 0.95 pence per litre (4.0%) to 24.66 pence per litre in 2010. In UK, there was a 0.22 pence per litre (0.9%) increase from the 2009 average, to 24.60 pence per litre in 2010. The average NI price stood at 19.48 pence per litre in 2009, but there was a 5.56 pence per litre (28.5%) increase in the average price in 2010, resulting in a 2010 price of 25.04 pence per litre.

The old answer to low milk prices or a surplus was to turn excess milk into other dairy products, with dairies producing other valuable products like butter, cream, cheese and yoghurt's. How many local Welsh dairies serving our urban centres that are still in business can you name? Milk aside, diary products can be big business. A 25 pence litre of milk can end up as something that sells for 15 times as much, people pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce healthy profits for the companies that produce them.

It is worth noting that some 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was actually produced outside of the UK. Its not just yogurt and cheese; it's a similar story with butter. Only one of the most popular supermarket brands [Country Life] is actually from UK milk. The bulk of our butter comes from Denmark and Ireland, and this is despite the fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with 11 years ago now import nearly half our butter from abroad, cheese imports are also up, some 60 percent over the last ten years. In the UK we are importing those products that have added-value and are busy exporting the low-value milk products which are then turned into butter, yogurt, etc and sold back to us. This is madness; this is what happens in the Third World, where countries export their raw commodities cheaply and then have little choice but to buy back the manufactured products that are made from their own raw materials.

The NFU has suggested, and they should know, that the UK is in the process of losing a critical mass of milk suppliers and that we are no longer in a position where we supply the UK's “core milk requirement” which is around some 13 billion litres per year (2010 figures). In 2009 / 2010 year there was a 15 percent drop in UK Milk prices. In the last 10 years (up to 2010) the Supermarkets’ margins that is the the amount of the price they take on milk have doubled.

Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land renowned for Dairy farming and where even though the price of our milk is cheap, we are now become a net importer of milk.

Ironically it was a development of railway communications during the industrial revolution that provided the means to speedily deliver the farmers milk to our towns and cities and ironically as a knock on effect there was a spread of diary production. It is doubly ironic that the first supermarkets (ironically in Sainsbury’s in Covent Garden, London, in 1869) sold what was then called “railway milk” from churns. The milkman arrived next delivering direct to our doorsteps, his near demise followed some years later was a direct result of super market price-cutting which has now, more or less, effectively killed him off.

The UK Government as early as 1914 recognised that milk was important for nutrition in children, that it helped prevent rickets, and provided vitamins. And so the first government attempts to regulate milk's supply and quality came about. Pasteurization was duly brought in to kill of certain bacteria. We now have low fat milk, slimmed milk, semi skimmed milk, etc – one thing to think about is that full fat milk is only 4 percent fat, low fat milk being 2 percent (or less) and that milk is approximately 95 percent water anyway.

During the good times, pre Mrs Thatcher, the banks fell over themselves throwing credit at framers to encourage them to (as the Government and the EU wanted) to ever expand their production. Once Mrs T (and the Conservatives) who was never interested in farming anyway, being far to enamoured of dodgy money men in the City, allowed Milk quota's (effective cuts) the bad times had begun for our Dairy farmers and oddly enough the banks stopped calling with offers of cheap credit.

What can best be described as industrial milk production is not without its problems – slurry production being one of them, which can be enormously toxic and environmentally damaging. Something else to consider is that modern cows to produce large amounts of cheap milk, a While a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years it only has three milking years in which to do it.

We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal. I won't be holding my breath for the Con Dem Government to get its act together and finally wake up and pull the fat (or the milk) out of the fire...they won't. So what are we going to do?

HOW MUCH?

When you consider the price of a pint (milk not beer), there are some things we should all be aware of. Firstly, a litre carton of full-fat, non-organic milk can cost between 70-80p of the shelf. Secondly, from this princely sum, a farmer will get between 21p and 28p. Thirdly, you can add in production costs off around 28p. Ouch! No wonder during the last 11 years some two thirds of dairy farmers in England and Wales have gone out of business, and finally it has been estimated that one dairy farmer leaves the industry every day.

Pretty grim reading, even grimmer if you are living it. Now historically the answer to low milk prices or a surplus was to turn excess milk into other dairy products, with dairies producing other valuable products like butter, cream, cheese and yoghurt's. Milk aside, diary products are big business, especially when you consider that a 25 pence litre of milk may end up as something that sells for 15 times as much. People are prepared to pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce pretty healthy profits for the companies that produce them.

Here's something else to think about, around 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was produced overseas. It’s a pretty similar story when it comes to our butter. Only one of the most popular supermarket brands [Country Life] is actually from UK sourced milk. The vast bulk of our butter comes from Denmark and Ireland, and this is despite the fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with 10 years ago are now importing nearly half our butter from abroad, cheese imports are also up, around 60 percent over the last ten years. We are importing those products that have added-value and are exporting the low-value milk products which are then ironically turned back into butter, yogurt, etc and sold back to us. This is madness; this is what happens in the Third World, where countries export their raw commodities cheaply and then have little choice but to buy back the manufactured products that are made from their own raw materials. Successive UK Governments both Conservative and New Labour have sat back and allowed this to happen.

The NFU has suggested (and believe me they should know) that the UK is in the process of losing a critical mass of milk suppliers and that we are no longer in a position where we supply the UK's “core milk requirement” which is around some 13 billion litres per year. In the last year there has been a 15 percent drop in UK Milk prices. In the last 10 years the Supermarkets’ margins (that is the the amount of the price they take on milk) have doubled in ten years. Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land renowned for Dairy farming and where even though the price of our milk is cheap, we are now become a net importer of milk.

The development of railway communications during the industrial revolution provided the means to deliver the farmers milk to our towns and cities and ironically as a knock on effect there was an increase and greater spread of diary production. It is doubly ironic that the first supermarkets (Sainsbury’s in Covent Garden, London, in 1869) sold what was then called “railway milk” from churns. The milkman arrived next delivering direct to our doorsteps, his near demise which followed some years later was a direct result of super market price-cutting which has now, more or less, effectively killed him off.

As as early as 1914, the UK Government recognised that milk was pretty important for nutrition in children, that it helped prevent rickets, and provided vitamins. And so the first government attempts to regulate milk’s supply and quality came about. Pasteurization was duly brought in to kill of certain bacteria. We now have low fat milk, slimmed milk, semi skimmed milk, etc – it is worth remembering that full fat milk is only 4 percent fat, low fat milk being 2 percent (or less) and that milk is approximately 95 percent water anyway.

If is worth further remembering that during the good times, pre Mrs Thatcher, the banks positively fell over themselves throwing credit at framers to encourage them to (as both the UK Government and the EU wanted) to ever expand their production. Once Mrs T and the Conservatives who were never particularly interested in farming anyway, being far to enamored of dodgy loads of money men in the City, allowed Milk quota’s (effective cuts) the bad times had begun to roll for our Dairy farmers and oddly enough the banks stopped calling with offers of cheap credit.

Note as well that What can best be described as industrial milk production is (and was) not without its problems – slurry production being one of them, which can be enormously toxic and environmentally damaging. Something else to consider is that modern cows to produce large amounts of cheap milk, a While a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years it only has three milking years in which to do it.

The talk of a milk ombudsman is welcome, but it needs to be more than talk (it will need real teeth), there is a need for action, before our dairy farmers (and our farmers) are driven out of business entirely. What may follow if nothing is done may not be very pretty, it may be semi industrial and serviced by cheap migrant Labour. Supermarkets have to take a share of the blame for aggressively pursuing ever greater shares of the profit.

Successive UK Governments (both Conservative and Labour) have also failed to take any meaningful action – this either being down to a combination of nice financial inducements from large Supermarkets and / or a general indifference to the agricultural sector. We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal. Sadly I suspect that I won't be holding my breath for the current Con Dem Government to pull the fat (or the milk) out of the fire...

THE PRICE OF A PINT?

When considering the price of a pint, and I am talking milk here, there are a few things we should all know. One litre carton of full-fat, non-organic milk can cost between 70-80p. From this a farmer will get between 21p and 28p. Production costs come in at around 28p. In the last 10 years two thirds of dairy farmers in England and Wales have gone out of business, and it has been estimated that one dairy farmer leaves the industry every day.

Historically the answer to low milk prices or a surplus was to turn excess milk into other dairy products, with dairies producing other valuable products like butter, cream, cheese and yoghurt's. Milk aside, diary products are big business. A 25 pence litre of milk may end up as something that sells for 15 times as much, people pay good money for ‘health yogurt’ – which with the addition of bacteria, flavouring and a marketing campaign produce healthy profits for the companies that produce them.

Some 40 per cent of our yogurt is made in France and Belgium, in 2009 more than 40 per cent of all Cheddar sold in the UK was produced abroad. It’s not just yogurt and cheese; it’s a similar story with butter. Only one of the most popular supermarket brands [Country Life] is actually from UK milk. The bulk of our butter comes from Denmark and Ireland, and this is despite tha fact that farm gate prices for milk remain consistently higher in Europe than here in the UK.

We (in the UK) when compared with 10 years ago now import nearly half our butter from abroad, cheese imports are also up, some 60 percent over the last ten years. In the UK we are importing those products that have added-value and are export the low-value milk products which are then turned into butter, yogurt, etc and sold back to us. This is madness; this is what happens in the Third World, where countries export their raw commodities cheaply and then have little choice but to buy back the manufactured products that are made from their own raw materials.

The NFU has suggested, and they should know, that the UK is in the process of losing a critical mass of milk suppliers and that we are no longer in a position where we supply the UK's “core milk requirement” which is around some 13 billion litres per year. In the last year there has been a 15 percent drop in UK Milk prices. In the last 10 years the Supermarkets’ margins (that is the the amount of the price they take on milk) have doubled in ten years. Now with a trend for both the processor and retailer to be the same, we have a situation where they take over three quarters of the price of a pint. We have now reached the situation where in a land renowned for Dairy farming and where even though the price of our milk is cheap, we are now become a net importer of milk.

Ironically it was a development of railway communications during the industrial revolution that provided the means to deliver the farmers milk to our towns and cities and ironically as a knock on effect there was a spread of diary production. It is doubly ironic that the first supermarkets (Sainsbury’s in Covent Garden, London, in 1869) sold what was then called “railway milk” from churns. The milkman arrived next delivering direct to our doorsteps, his near demise followed some years later was a direct result of super market price-cutting which has now, more or less, effectively killed him off.

The UK Government as early as 1914 recognised that milk was important for nutrition in children, that it helped prevent rickets, and provided vitamins. And so the first government attempts to regulate milk’s supply and quality came about. Pasteurization was duly brought in to kill of certain bacteria. We now have low fat milk, slimmed milk, semi skimmed milk, etc – one thing to think about is that full fat milk is only 4 percent fat, low fat milk being 2 percent (or less) and that milk is approximately 95 percent water anyway.

During the good times, pre Mrs Thatcher, the banks fell over themselves throwing credit at framers to encourage them to (as the Government and the EU wanted) to ever expand their production. Once Mrs T (and the Conservatives) who was never interested in farming anyway, being far to enamored of dodgy money men in the City, allowed Milk quota’s (effective cuts) the bad times had begun for our Dairy farmers and oddly enough the banks stopped calling with offers of cheap credit.

What can best be described as industrial milk production is not without its problems – slurry production being one of them, which can be enormously toxic and environmentally damaging. Something else to consider is that modern cows to produce large amounts of cheap milk, a While a modern Frisian may produce as much 4 times as much milk as equivalent cows did 50 years it only has three milking years in which to do it.

The talk of a milk ombudsman is welcome, but it needs to be more than talk, there is a need for action, before our dairy farmers (and our farmers) are driven out of business entirely. What may follow if nothing is done may not be pretty, it may be semi industrial and serviced by cheap migrant Labour. Supermarkets have to take a share of the blame for aggressively pursuing ever greater shares of the profit.

Successive UK Governments (both Conservative and Labour) also failed to take any meaningful action – this either being down to a combination of nice financial inducements from large Supermarkets and / or a general indifference to the agricultural sector. We, as consumers also have to take a share of the blame because we allowed all of these things to happen, if we want quality milk and dairy products (that are produce from UK milk) then we will have to change the way we buy, if we do that then out farmers will get a better deal.